Sucheta Dalal :CURRENT ACCOUNT (MoneyLIFE Issue 1st Jan 09)
Sucheta Dalal

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CURRENT ACCOUNT (MoneyLIFE Issue, 1st Jan 09)  

December 16, 2008

 Media: Unravelling Deals

 
Realty and finance have earned a bad name because of the steep fall in share prices, but media stocks were as much the babies of the monster bull run and have been badly hit in India and abroad. US real estate whiz, Sam Zell, enhanced his reputation by exiting at the peak of that bubble, but failed to read the media business right. The Tribune Company, which owns such renowned brands as The Los Angeles Times, Chicago Tribune and Baltimore Sun, has filed for bankruptcy. The venerable New York Times has also mortgaged its office building to raise funds.
 
The US is, indeed, the nerve centre of the global financial crisis, but the consequences of easy money and reckless growth are being felt in India as well. The gush of private equity (PE) funding has decisively ended and other sources of finance have dried up. Since profitability was never a strong point of media companies, when the money tap was shut off, it forced some savage cost-cutting. The most ruthless of these were in publications owned by leading politicians.
 
Consider this. A few weeks ago, Yuva, a youth paper with grand plans, started by the son of Maharashtra Congress leader Narayan Rane, suddenly shut shop. In early December, Sakaal Times, owned by Sharad Pawar’s family, simply did not open the doors of its Delhi office just six months after its launch, after having held out the promise of editions around the country. Around 70 employees were left jobless without even the courtesy of a pink slip. These expansion plans were all premised on raising PE or IPO funds.
 
Many publications have dropped advertising supplements; business papers have axed their Hindi editions and general newspapers are cutting pages. A slew of new publications that had been hiring at astronomical salaries have quietly dropped their plans. Among the casualties are apparently a business paper from the TV18-Jagran Publications combine with the Financial Times of London and the Indian edition of the Forbes magazine.
 
In television, speculative news reports about INX Media’s possible takeover keeps it more in the news than its channels. UTV Global Broadcasting has closed offices in Noida, stopped fresh hiring and is reviewing the business model of its large bouquet of channels. The Anil Dhirubhai Ambani Group’s Big TV, which was to launch 20 channels, has delayed its roll-out – some say by a year. Most broadcasters are hit by a double whammy. Far from collecting subscription revenues from viewers, the clutter of new channels forced them to pay hefty ‘carriage fees’ to cable companies. With advertising revenues drying up, general entertainment channels in many languages may be forced to shut shop in the coming months. Meanwhile, profitability has nosedived everywhere while some, such as NDTV, have reported hefty losses – all this is reflected in the sharp decline in the share prices of media companies.
 
Even the market leader, The Times of India, has cut pages in its publications and the business model of its revenue-spinning Private Treaty Division seems likely to go for a toss. This division specialised in sweetheart deals to swap equity for advertising spend (albeit at a sharp discount). Its revenues were also boosted by the sharp appreciation in shares of its ‘treaty’ companies. All that has ended with the IPO market virtually dead. The group seems to have started exiting from its private treaty investments (jewellery-maker Rajesh Exports is one example).

-Sucheta Dalal

 


-- Sucheta Dalal



 



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